ECONOMIC PROBLEMS

Otago Daily Times, Issue 22024, 5 August 1933, Page 16

ECONOMIC PROBLEMS

AN INTERESTING ADDRESS There was a good attendance of members of the Anderson’s Bay Citizens’ Association in the Tainui Hall on Thurs-. day evening when an instructive address on the economic problems of the present time was given by Mr C. H. Chapman. Describing the theories of Major C. H. Douglas as the “ new economics,” Mr Chapman set out to give his audience a clear understanding of the Douglas system as applied to *he world conditions of to-day. These conditions, he said, were due to mathematical defects in the economic mechanism. Ho went on to discuss Major Douglas’s A plus B theorem, which, he said, made no attack on banks or other financial institutions, on bankers, or on politicians. On the contrary it showed that the mechanism which they had to use was totally unsuited to the purpose for which they used it. The banking system was a mechanism just as the whole economic system was a mechanism, and. whilst it was true that some banking experts might be rightly attacked for being content to advertise as good or for being willing to struggle to maintain a mechanism which obviously did not do its work too well, and which, technically considered. might be doubted ns being suitable for modern needs, yet all who had votes and were in a position to struggle to enforce a change by political means were just ns morally responsible for the appalling results of the present mechanism as any banker. What was called purchasing power was not something which was in actual fact dependent upon employment, or something arising out of the production of goods and services. It was true that most of them get purchasing power only if they were performing some work, but that was simply because in past ages, when there was no high speed machinery it was expedient to distribute purchasing power in return for work. Actually, however, since all but a fraction of their money, most of which was represented by book entries and exchanged by cheque payments, was created by banking mechanism and had to be repaid back to banks being the fact was that the mechanism producing money was quite separate from that which produced goods or services, and there was nothing in the two mechanisms which necessarily gave purchasing power any relation to goods and services expressed ns prices or total costs. Describing the A plus B theorem, Mr Chapman said that in any manufacturing undertaking the payments made might be divided into two groups—Group A (payments made to individuals in vvages, salaries, and dividends) and Group B (payments made to other organisations, raw materials, bank charges, and other external costs). The rate of distribution of purchasing power to individuals was represented by A, but since all payments went into prices

the rate of generation of prices cannot be less than A pins B. Since A would not purchase A plus B, a proportion of the product at least equivalent to B had to be distributed by a form of purchasing power which was not comprised in the description grouped under A. This was one cause of deficiency of purchasing power in the hands of the general public. There were at least six more causes:—(l) Money profits collected from the public; (2) deflation (a decrease in the amount of money); (3) the principle of taxation, which was a collection of money taken from existing purchasing power for purposes either of redistribution in the form of relief pay, or of repayment by the Government of bank advances; (4) savings in the sense of hoarding; (5) savings in the sense of re-investment in new production; (0) difference between the liquidation of costs and creation of prices. Mr Chapman went on to discuss these questions, and at the conclusion of the address, many questions were answered by the speaker.

A vote of thanks was accorded Mr Chapman for his instructive address.